Increasing evidence of purchasing power parity over the current float

We conduct unit root tests of real exchange rates with the United States dollar and the German mark as base currencies. Using samples of data which begin in 1973 and end between 1982 and 1996, we find that, as the sample is extended, the evidence of PPP strengthens with panel, but not univariate, methods. Because of the sharp rise and fail of the dollar in the early 1980s, rejections of the unit root null do not monotonically increase with the sample size. The evidence of PPP is uniformly stronger when the mark is used as the base currency. (C) 1998 Elsevier Science Ltd. All rights reserved.